Global interest in web3 gaming grew significantly in the last decade, thanks to the perks that come with blockchain -- true ownership and self-custody of in-game assets. More so, the idea of future rewards or speculative value appreciation of in-game assets has made many turn to this stream.
In this article, we will attempt to summarily explain what NFTs are, and how they relate to gaming assets in web3. Also, understanding the value and fungibility of NFT items is important to manage expectations as a collector of in-game assets.
What is an NFT?
NFT is short for Non-fungible Token - a token that cannot be exchanged equally with another token but holds a value of its own. Most NFTs are unique digital items, with a history of ownership and copyright data managed as metadata using special contracts on the blockchain.
However, before we dive into NFTs, we need to examine fungibility and its application in this context.
What is fungibility?
Merriam-Webster defines "fungible" as things capable of mutual substitution. In a nutshell, this means that one item is functionally the same as another. The best way to look at this is in the context of dollar bills. A five-dollar bill is worth the same as any other five-dollar bill in circulation. Thus, if you exchange your five-dollar bill with your friend's bill, you can still use it to buy the same products. The five-dollar bills are known as fungible items. However, if you own a scarf handmade by someone close to you, that scarf and all the memories associated with it are yours. Others might use the same pattern, but that scarf is not the same as another in this context - they're non-fungible.
The same thing applies to trading cards or any other real-world collectibles. Each item holds a different meaning to each person and over time, depending on the community of supporters for that particular item, there is bound to be a varying "value" or a sense of attachment to each item.
What is the value of an NFT?
As mentioned earlier, non-fungible items have a certain innate value unique to them. Similarly, NFTs offer that same uniqueness but in a digital format. The "token" part of this definition refers to the digital record stored immutably on the blockchain. Since the blockchain is public, anyone can see who owns which NFTs, making it less likely for someone to sell you something they don't own.
The digital aspect -the metadata, coincidentally, is what makes each NFT unique. A smart contract, located on the blockchain, gives each token its uniqueness. No two of these tokens can be swapped (since they are non-fungible), but ownership can be exchanged for something of equivalent value. NFT items include art collectibles, crypto domain names, and even in-game items.
Another important point to note here is Rarity. This essential describes the property of an NFT that makes it share that uniqueness with a limited number of similar items. The rarer an item or its properties, the more it is sought after, or supposedly, scarcity makes an asset have more value. So NFTs with rare traits may also rank higher in value than others.
What are gaming assets in web3?
Games built with emerging web3 elements are thought of in some circles to be game changers for enthusiasts. This reasoning stems from their unique proposition to offer gamers true ownership of gaming assets, and the introduction of an inclusive gaming economy.
Gaming assets on the blockchain are mostly represented in the form of NFTs which are then treated as collectibles. If you are familiar with real-world game collectibles such as Pokemon trading cards, and character figurines, you would agree that the world of collectibles holds a different meaning to enthusiasts.
Games built using Beam’s infrastructure have access to Sphere, an NFT marketplace for a wide collection of in-game items across multiple chains. The in-game assets used within these games can be listed and sold, or collected by gamers.
Are NFTs the same as ETH tokens?
Many people have heard about tokens before, associating them with the ETH chain. ERC-20 tokens are the typical format used for these fungible tokens, taking their name from the smart contract used to generate them. NFTs, being non-fungible, have a different type of smart contract generating them. There are two types of NFTs, each generated by a separate smart contract:
ERC-721: These tokens represent a single, unique asset that cannot be interchanged with any other ERC-721 token. Each token holds its own unique values and can represent the ownership of things like a unique piece of art or digital cinema.
ERC-1155: These tokens refer to multi-tokens representing a collection of owned items. While ERC-721 is an excellent standard for single NFTs, what would happen if a user had to transfer a series of them to their wallet? Transactions were slow and cumbersome, so ERC-1155 was designed as the "next-generation multi-token standard," allowing the transfer of multiple tokens using a single token to reference them.
NFTs on different blockchains
In the description of an NFT above we are mainly referring to NFTs on the Ethereum blockchain. However, there are dozens of different blockchains such as Polygon and Solana that support NFTs. Functionally, they are similar, the differences are merely technical. Within the Sphere marketplace, you might be asked to switch between different blockchains using a different wallet or switching networks on MetaMask.
An example of the differences between NFTs on Ethereum and Solana;
ERC-721 (Ethereum) = SPL or Master Editions (Solana)
ERC-1155 (Ethereum) = Editions (Solana)
What are NFT royalties and fees
NFT royalties and fees are important concepts to familiarize yourself with when dealing with NFTs. They are of extreme importance in ensuring fair compensation for content creation and marketplace maintenance.
Check our Fees and Rewards section for more information.